Question 1

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

Accepted Answer

A) True 
 B)False

Question 2

The concept of the time value of money is based on the interest earning power of money.

Accepted Answer

A) True 
 B)False

Question 3

Rebecca intends to major in business in college.She has never had much interest in subjects with numbers and so she'd like to avoid taking any finance courses if possible.Rebecca should:

Accepted Answer

A)  avoid finance courses and focus on subjects that she enjoys.
B)  realize that her success in business requires an understanding of financial issues.
C)  change majors and go into nuclear engineering.
D)  take a finance course to satisfy graduation requirements.E) None of the above
F) A) and B)

Question 4

Jackson Plumbing,a medium sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Accepted Answer

A)  issue commercial paper as needed.
B)  eliminate credit sales to improve their cash inflows and reduce the firm's investment in accounts receivable.
C)  request that the firm's board of directors approve an issue of additional shares of common stock.
D)  arrange with the firm's commercial bank a revolving credit agreement.E) None of the above
F) B) and C)

Question 5

Long-term financing would normally be used to purchase:

Accepted Answer

A)  buildings.
B)  supplies.
C)  inventory.
D)  highly liquid assets.E) A) and B)
F) A) and C)

Question 6

No matter the size,finance is a critical activity for:

Accepted Answer

A)  accountants,but not for financial managers.
B)  non-profit organizations,but not for profit-seeking businesses.
C)  profit-seeking and non-profit organizations.
D)  profit-seeking,but not for non-profit organizations.E) None of the above
F) A) and B)

Question 7

A bond is like a company-issued IOU with a promise to repay the amount borrowed on certain date.

Accepted Answer

A) True 
 B)False

Question 8

Businesses acquire long-term financing from two major sources:

Accepted Answer

A)  debt financing and government funds.
B)  debt financing and equity financing.
C)  equity financing and trade credit.
D)  retained earnings and commercial paper.E) A) and B)
F) A) and C)

Question 9

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Accepted Answer

A)  trust fund.
B)  mutual funds.
C)  retained earnings.
D)  preferred capital.E) None of the above
F) A) and B)

Question 10

Credit cards are a good choice as a source of short-term financing needed for the next year.

Accepted Answer

A) True 
 B)False

Question 11

An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money.

Accepted Answer

A) True 
 B)False

Question 12

As a financial manager for a very profitable manufacturer of specialty steel,Kurt has been asked to investigate sources of long-term funds to finance the construction of a new facility.Kurt would prefer a funding source that does not require interest payments or involve major underwriting fees.One source that Kurt will find attractive is retained earnings.

Accepted Answer

A) True 
 B)False

Question 13

When using ______financing,the company incurs a legal obligation to repay the amount borrowed.

Accepted Answer

A)  equity
B)  commitment
C)  debt
D)  retained earningsE) A) and D)
F) B) and C)

Question 14

The effective management of accounts receivables requires financial managers to:

Accepted Answer

A)  review the credit history of new customers.
B)  refuse bank-issued credit cards.
C)  allow customers more time in paying their past due accounts.
D)  provide prompt cash payments to suppliers.E) A) and B)
F) None of the above

Question 15

Commercial paper consists of unsecured short-term debt.

Accepted Answer

A) True 
 B)False

Question 16

A line of credit represents a guarantee from a bank to lend a firm a given amount of money.

Accepted Answer

A) True 
 B)False

Question 17

Equity financing represents money acquired from the operations of the firm or through the sale of ownership in the company.

Accepted Answer

A) True 
 B)False

Question 18

Rather than requiring cash payment for all sales,some firms offer credit to:

Accepted Answer

A)  match revenues with expenses for the same time period.
B)  keep current customers happy and attract new customers.
C)  improve the organization's cash flow position.
D)  replace accounts receivable with fixed assets.E) C) and D)
F) B) and D)

Question 19

offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public.

Accepted Answer

A)  Trade credit
B)  A line of credit
C)  Commercial paper
D)  FactoringE) All of the above
F) A) and B)

Question 20

A just-in-time inventory system allows a firm to:

Accepted Answer

A)  reduce capital expenditures.
B)  reduce their investment in inventory.
C)  extend credit to new customers.
D)  provide sufficient inventory for most contingencies.E) B) and C)
F) A) and C)

Exam 17: Financial Management Appendix C Managing Risk

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Correct Answer
verified

A line of credit represents a guarantee from a bank to lend a firm a given amount of money.

Correct Answer
verified

Jackson Plumbing,a medium sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct Answer
verified

Commercial paper consists of unsecured short-term debt.

Correct Answer
verified

Rebecca intends to major in business in college.She has never had much interest in subjects with numbers and so she'd like to avoid taking any finance courses if possible.Rebecca should:

Correct Answer
verified

offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public.

Correct Answer
verified

Correct Answer
verified

Credit cards are a good choice as a source of short-term financing needed for the next year.

Correct Answer
verified

Equity financing represents money acquired from the operations of the firm or through the sale of ownership in the company.

Correct Answer
verified

The concept of the time value of money is based on the interest earning power of money.

Correct Answer
verified

A bond is like a company-issued IOU with a promise to repay the amount borrowed on certain date.

Correct Answer
verified

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

Correct Answer
verified

Businesses acquire long-term financing from two major sources:

Correct Answer
verified

A just-in-time inventory system allows a firm to:

Correct Answer
verified

When using ______financing,the company incurs a legal obligation to repay the amount borrowed.

Correct Answer
verified

Long-term financing would normally be used to purchase:

Correct Answer
verified

The effective management of accounts receivables requires financial managers to:

Correct Answer
verified

No matter the size,finance is a critical activity for:

Correct Answer
verified

Rather than requiring cash payment for all sales,some firms offer credit to:

Correct Answer
verified

An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money.

Correct Answer
verified

Exam 17: Financial Management Appendix C Managing Risk

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Correct AnswerverifiedShow Answer

A line of credit represents a guarantee from a bank to lend a firm a given amount of money.

Correct AnswerverifiedShow Answer

Jackson Plumbing,a medium sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct AnswerverifiedShow Answer

Commercial paper consists of unsecured short-term debt.

Correct AnswerverifiedShow Answer

Rebecca intends to major in business in college.She has never had much interest in subjects with numbers and so she'd like to avoid taking any finance courses if possible.Rebecca should:

Correct AnswerverifiedShow Answer

offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Credit cards are a good choice as a source of short-term financing needed for the next year.

Correct AnswerverifiedShow Answer

Equity financing represents money acquired from the operations of the firm or through the sale of ownership in the company.

Correct AnswerverifiedShow Answer

The concept of the time value of money is based on the interest earning power of money.

Correct AnswerverifiedShow Answer

A bond is like a company-issued IOU with a promise to repay the amount borrowed on certain date.

Correct AnswerverifiedShow Answer

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

Correct AnswerverifiedShow Answer

Businesses acquire long-term financing from two major sources:

Correct AnswerverifiedShow Answer

A just-in-time inventory system allows a firm to:

Correct AnswerverifiedShow Answer

When using ______financing,the company incurs a legal obligation to repay the amount borrowed.

Correct AnswerverifiedShow Answer

Long-term financing would normally be used to purchase:

Correct AnswerverifiedShow Answer

The effective management of accounts receivables requires financial managers to:

Correct AnswerverifiedShow Answer

No matter the size,finance is a critical activity for:

Correct AnswerverifiedShow Answer

Rather than requiring cash payment for all sales,some firms offer credit to:

Correct AnswerverifiedShow Answer

An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money.

Correct AnswerverifiedShow Answer

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